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FRANCE: Nike Unit Is Placed Under Investigation

Associated Press
January 17th, 2006

Nike Inc.'s French unit has been placed under judicial investigation as part of a fraud probe linked to its sponsorship of the Paris Saint-Germain soccer club, a judicial official said Tuesday.

In the past few months, three former Nike France officials have been placed under investigation -- a step short of being charged -- in the case.

The case initially revolved around player transfers between 1998 and 2003, but investigators quickly suspected a scheme involving allegedly bogus royalty payments to players, enabling the club to dodge social charges on part of its wage bill. ''Social charges'' are paid by French companies to fund health and welfare services for workers.

Nike France, a subsidiary of the Beaverton, Ore., sportswear giant Nike Inc., has been PSG's official sponsor since 1989. The company was placed under investigation on Monday for alleged fraud, use of fraud and complicity in hiding employment, the judicial official said. The official, who was not authorized to speak publicly about the probe, asked not to be identified by name.

In a brief statement, Nike France denied the allegations of wrongdoing and said it would continue to cooperate with authorities in the probe. A Nike spokeswoman said the company would not comment further.

Investigating judges suspect that Nike may have paid royalty bonuses to certain players for special contracts to promote the Nike image, enabling the club to dodge some of the social charges it would normally have to pay.

The sportswear maker then allegedly recovered the money from PSG in the form of fines for supposed breaches of their sponsorship contract.

The former head of Nike France, Jean-Claude Petit, was placed under investigation in early November in the case. Two other former Nike France officials also are under investigation as well as PSG's former finance director Pierre Frelot, who left the club in 2003.

When the investigation opened a year ago, it was originally trying to determine whether kickbacks were paid in about 30 PSG transfers between 1998-2003, including those of Ronaldinho, Marco Simone and Nicolas Anelka.



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